The Great American Telecom Con Game

There is an interesting thing about having a legitimate 3rd party hard-line / cabled internet service provider, like back when DSL internet had at least 20 different options to choose from. It forces dramatic price and service competition and incentive to innovate faster and better services. With Google joining into the fray of the typically two-party ISP wired provider market of today, Google would seem just happy knowing it would break even or make only a tiny fraction of profit from its fiber internet, tv, and phone service. The goal of Google is not to make Google fiber a major profit wing it would seem from all account from their people. Yes it will provide you with internet access hundreds of times faster at a fraction of the rate other telecom provider are charging. But that leaves many supply side capitalists asking, “why?”

Google makes money not on the services it provides per say; like Google apps and search, but on their non invasive advertising and people buying advertising services. It’s what funds a many an independent news blog sites, like this one you are reading. Google make software as avenues and as side projects that they can then leverage on the millions and billions of users who start to use there apps like Gmail or Google Docs or Youtube. So while they sell services at cheaper and cheaper rates than other providers they do it because their goal is volume. The more people they get online the more they make.

In more ways than one Google is showing a long game approach to how to do business. Not the typical cut and run quarterly profit turnaround you see with most “telecon” companies. Not only that, but they are providing their services and software at the core as open platforms and the majority in open source software that is supporting open standards technology, forcing significant change and required major updates to telecom infrastructure operations. As for the case of Google Fiber they have it all as the FCC telecom term “open access”. Open access means anyone could provide 3rd party ISP, video, or phone services over the fiber lines Google is operating and burying or acquired with extremely limited or even zero maintenance costs. Thus adding even more venues for competition and dramatically ramping up speed for innovation.

Right now if I was someone who wanted to offer third-party competitive internet service for a business only Verizon copper phone lines are available for me to “lease” to provide access over. Before 1999 Verizon’s and other Baby bells phone companies had to provide third-party companies access to their lines for data services at a cheap rate. This allowed significant competition, you might remember the names Earthlink, SpeakEasy, or perhaps Erol’s, or Toadnet run by mom and pop ISPs in the early 1990s in the Maryland area. The low fee they all paid was called a carriage fee, usually $6 to maybe $12 per user, as their using the big phone company’s lines to provide DSL service was like a person riding a carriage on a road, or phone line. But due to a bill, 1999 Broadband act, that had the goal of connecting every american home with “blazing fast” 1 megabit per second “broadband”, that was gonna change. In 1997 at the start of the bill’s inception 75% of america was either still on dial-up or for 45% of that, had no access ability what so ever. The Broadband Act failed to do that universal 1 mbps “last mile” deployment that but it did give 10 billion dollars to major telecoms like AT&T, Verizon, and Comcast over 10 years while also allowing the phone companies to get a provision passed that said they no longer had to have the carriage fees set to a reasonable rate anymore. The Baby Bells could now charge anywhere between 20 to 60 dollars per user from third-party internet service providers. On top of that the fine print now required consumers to then lease a line from the phone company called a “naked” line; typically costing $9 a month, that has no real phone call service on top of the DSL Service, note this fee is waved if you went with the Baby Bell DSL provider in your area who owned the phone lines.

Now Cable tv lines were completely private from the start. No third-party could use them to provide service. The cable company that laid them or had purchased said infrastructure, like Comcast slowly did in acquiring market after market of smaller cable providers, was the only one who could use it. This is why any house holds that have a choice of between cable providers had to have coax lines buried from different locations to their house. For example in those rare situations where you had a choice between two traditional Cable companies, Like in my area of central Maryland area, you had Millennium cable; which merged with another provider to become Broadstripe, which is from a buried line box on the street or you had Comcast which had bought an older cable company called Jones Cable which had their lines run over the telephone poles. But because there was no third major cable provider there was no reason for competition between two of them. By the time Verizon FiOS started offering service Broadstripe had sold its assets to other companies and was now just a shell of a company in our area.

Now note this doesn’t mean that Verizon, Comcast, RCN, Time Warner, CableVision, COX, AT&T and other big providers that now have all moved over to fiber backends don’t allow each other to run over there Backend fiber connections to provide service. This is called peering and it’s how having an interconnected network that is the internet is even possible.

But back on the consumer side, just adding Google fiber in three locations with another two on the way is forcing the oligopoly controlled wired hardline cable telecom internet providers and hardline former phone line telecom providers competition in the market to show the magic to the internet is not something so hard to understand. Google hitting the market for ISP service is showing that “American Telecons” are in fact keeping the american populous technologically stagnated on purpose for fear they might lose profits. Google, an advertising firm that plays the roll of software company, is showing us the true face of telecoms, that they wish, in the end, to block any disruptive and competitive upstart services that dare run over their private toll roads.

To understand this more just look back in history to debates of “Network Neutrality”. The concept that how much pipe speed you have to send and receive should determine how fast ALL packets from online services can be sent or received to you. So in the case of say the next Netflix or next Aereo or the next Amazon or the next Vonage or services like Apple’s Facetime or Google Hangout or even Skype; Their data travels at the same unfettered speed as say data used to send Comcast TV signales to your house, or Comcast OnDemand video, or Comcast streaming video, if you were a Comcast subscriber. This would apply the same if you were a customer who would use Verizon, RCN, Cablevision, AT&T U-verse, or Cox. They could not slow down the data of other services and prioritized their packets to you on purpose to limit the service, just because it’s a competitor. Now some might say that they are too flooded from all this new push for streaming video from Netflix, or amazon, or from “downloading” because the current 25mbps they promise you isn’t meant to be used at full speed. It has always been meant to say you could drive up 50 miles per hour but really we only want you to drive 5 miles an hour, and we will penalize you if you keep up at 50 mph the entire time. The point is they are showing they want to hold back technology, but why? Because they just don’t want to spend the money on new infrastructure. Even if they say you are already paying for it, say for the few residential people who have 300mbps to the house on Verizon FiOS or Comcast. Also putting virtual caps on data you can download is just another virtual limit on a service that is only limited by whether or not you got glass fiber that can blink light connected to computers called routers that can “Route” that light “binary signal” to the right final connection destination.

Google entering the fray looking at internet service as a venue to reach advertising first rather than selling internet as a telecom service is finally making the long-standing “reliable” wired competitors in the thousand of “randomly” paired duopolistic markets running scared. But just think what would happen if there was even another provider to make this a four person market grudge match, or a fifth, or a sixth? With Google’s forcing their fiber deployment to be open access we could see the rise of the very first non-profit NGO Internet Service provider organizations. A concept that has made waves and causing some Telecoms to seriously fret. I for one hope such an idea takes off because I have seen how having access to the internet has expanded both world views, communities access to trade, and the ability to educate our young. And even now the United Nations has listed access to internet as a human right. Can you think of many jobs now in america you can even get without having to apply online? I know I can’t, unless you got a friend that has a connection somewhere, under the table.